Current CXO Stock Info

Producing 228 MBOEPD, Running 20 Rigs
Concho Resources Inc. (ticker: CXO) bought home a net income of $835 million, or $5.58 per diluted share for Q1 2018. Last year at this reporting period, Concho had a net income of $650 million, or $4.37 per share. Additionally, the company said it has reduced its total debt by $320 million in Q1 2018, as compared to year-end 2017. As of March 31, 2018, Concho had total long-term debt of $2.4 billion, with no borrowings outstanding under its credit facility.

Northern Delaware Basin Operations From Conch...

Analyst Commentary

From KLR Group - John Gerdes, Head of Research

Concho Resources, Inc. (CXO)
Stronger Oil/Gas Price Net Backs Increase Fair Value
Price Target: $166.00
Price: $157.03

Investment thesis
We are increasing our CXO target price $6 to $166 per share due to higher oil and gas price realizations. As a consequence of the announced RSP Permian (RSPP, $49.62, H, $51) acquisition, Concho’s capital yield should increase ~10% to ~200%. Only three U.S. E&P business models exceed Concho’s capital yield.

Upper echelon capital yield (cash recycle ratio)
Given differential operating scale and an approximate 67% pro forma oil composition, Concho’s cash operating margin is ~35% higher than the industry median, while the company’s capital intensity is ~10% less than the industry median. Accordingly, Concho generates a capital yield of ~200% versus the industry median cash recycle ratio of ~150%.

Exceedingly complementary acquisition
Concho is acquiring RSP Permian for ~$9.5 billion in total consideration comprising 0.32 shares of CXO for each RSPP share and the assumption of ~$1.5 billion in debt. The transaction increases Concho’s Permian Basin leasehold by ~92,000 net acres to ~640,000 net acres and should close in 3Q/18.
Pro forma, the company expects to run a 27-rig Permian Basin program. Concho plans to conduct a ten-rig northern Delaware Basin and nine-rig southern Delaware Basin program. The company plans to drill ~230 Delaware Basin wells. Concho plans to conduct a seven-rig Midland Basin program and drill ~120 Midland Basin wells this year. Additionally, the company is conducting a one-rig program along the Northwest Shelf and plans to drill ~30 wells this year.

Half-cycle economic tier:
(1) Southern Delaware Wolfcamp A/XY (Loving/Winkler Counties): Wolfcamp A/XY wells (~7,500’ lateral) should recover ~1,500 Mboe (~200 Mboe/1,000’ lateral, 70%-80% oil) for a cost of ~$8 million (~$1,075/ft.).
(2) Northern Delaware Avalon/Wolfcamp A: Northern Delaware Basin wells (5,500’-6,000’ laterals) cost $5.5-$6 million (~$1,000/ft.). Avalon wells should recover ~1,300 Mboe (~225 Mboe/1,000’ lateral, ~60% oil). Wolfcamp A wells should recover ~1,300 Mboe (~225 Mboe/1,000’ lateral, ~60% oil).
(3) Midland Wolfcamp A/B/Spraberry: Wolfcamp A/B/Lower Spraberry wells (~9,000’ laterals) should recover ~1,100 Mboe (~125 Mboe/1,000’ lateral, 70%-80% oil) for a cost of ~$7.5 million (~$825/ft.).
(4) Northern Delaware Bone Spring: Second/Third Bone Spring wells (5,500'-6,000' laterals) should recover ~875 Mboe (~150 Mboe/1,000’ lateral, ~70% oil) for a cost of $5.5-$6 million (~$1,000/ft.).
(5) Southern Delaware Third Bone Spring/Wolfcamp A (Reeves/Ward Counties): Third Bone Spring/Wolfcamp A wells (~10,300’ laterals) should recover ~1,300 Mboe (~125 Mboe/1,000’ lateral, ~60% oil) for a cost of approximately $10 million (~$975/ft.).  


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